Various Stages of MiFID Implementation in Lithuania

Tomas Talutis

Lithuanian Securities Commission

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Content

Implementation of the Directive 2004/39/EC (Level 1) in Lithuania; Implementation of the Directive 2006/73/EC (Level 2) in Lithuania; Level 3; Current drafting of the legal acts; Practical problems.

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Implementation of MiFID in Lithuania

General principle - Levels approach:

1. Level 1 – Law on Markets in Financial Instruments;

2. Level 2 – Lithuanian Securities Commissions Resolutions;

3. Lithuanian Securities Commissions explanations and guidance on issues related to trading in financial instruments.

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LEVEL 1 – Directive 2004/39/EC on markets in financial instruments

Law on Markets in Financial Instruments:

The Parliament of the Republic of Lithuania passed on 18 January 2007; Came into force on 8 February 2007; The new requirements to be applied to companies providing investment services stipulated in the Law on Markets in Financial Instruments will become fully operational as of 1 November 2007; By that time the companies will have to ensure their preparedness for the compliance with the new requirements.

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The principal novelties introduced by the Law on Markets in Financial Instruments:

1. A possibility for alternative venues for trading in financial instruments – elimination of the Stock Exchange monopoly;

2. more detailed requirements governing the organisation and conduct of business of finance brokerage firms;

3. new pre- and post-trade transparency requirements for equity market;

4. Investment services (such as reception and transmission of customer orders and the provision of investment advice) will also be provided by a new type of licensed entities, – financial advisor companies.

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LEVEL 2 – Directive 2006/73/EC implementing Directive 2004/39/EC (1)

Article 18 of the Law on Markets in Financial Instruments gives the powers of the Lithuanian Securities Commission to establish:

1. the rules for the organisation of the operations of financial brokerage firms specifying the organisational requirements set forth in Article 13 of this Law;

2. the rules on the avoidance and the management of the conflict of interests;

3. the procedure for the provision of investment services and of placement and execution of clients’ orders.

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LEVEL 2 (2)

Directive 2006/73/EC implementing Directive 2004/39/EC

Rules as regards organisational requirements for finance brokerage firms

Rules as regards providing investment services

and reception and execution of orders on behalf of clients

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Rules as regards organisational requirements for finance brokerage

firms (1)

Lithuanian Securities Commission approved on 17 May 2007; Will come into force on 1November 2007; By that time the companies will have to ensure their preparedness for the compliance with the new requirements.

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Rules as regards organisational requirements for finance brokerage

firms (2) Rules shall apply to finance brokerage firms and credit institutions, which provide investment services; Set out requirements for internal control mechanisms, risk management, internal audit, complaints handling, outsourcing and etc. (article 5-25 of the Directive 2006/73/EC).

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Rules as regards providing investment services and reception and execution of orders on behalf

of clients (1)

Lithuanian Securities Commission approved on 31 May 2007; Will come into force on 1November 2007; By that time the companies will have to ensure their preparedness for the compliance with the new requirements.

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Rules as regards providing investment services and reception

and execution of orders on behalf of clients (2)

Rules shall apply to finance brokerage firms and credit institutions, which provide investment services; Set out operating conditions: requirements for information to clients and potential clients, assessment of suitability and appropriateness, reporting to clients, best executions and etc. (article 3, 26-52 of the Directive 2006/73/EC).

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LEVEL 3

CESR’s guidelines and recommendations in regard to MiFID; Lithuanian Securities Commission activity

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Current drafting of the legal acts

New version of the Rules for the issue and the withdrawal of the licences of financial brokerage firms and financial advisory companies:

1. Will replace currently applied Rules for the issue and the withdrawal of the licences of financial brokerage firms;

2. Will specify some procedures of the issue and the withdrawal of the licences of financial brokerage firms and financial advisory companies set forth in Law on Markets in Financial Instruments;

3. Will specify some procedures for the submission of notifications on the acquisition and the disposal of qualifying holdings of financial brokerage firms set forth in Law on Markets in Financial Instruments.

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Problems in the view of MiFID

Scope of services and activities of the financial advisory companies outside the scope of MiFID; Practical preparedness investment firms for the compliance with the new requirements.

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Thank You for Your attention